Tencent announces Q4 2020 results, rakes in $20.5 billion

China’s Tencent has released its financial results for the fourth quarter of 2020. The tech giant has earned $20.5 billion (133.7 billion Yuan) in Q4, reporting a 26 percent year-on-year increase.

Of its total revenue, value added services (VAS) raked in the most revenue for the company at $10.2 billion (66.9 billion Yuan), a 28 percent increase year-on-year.

Revenue from cloud computing and other business services showed a similar 29 percent year-on-year increase to $5.9 billion (38.5 billion Yuan) thanks to Tencent’s penetration into the industrial internet with its flagship Software-as-a-Service (SaaS) products and upgraded cloud infrastructure.

The company also invested in enhanced Internet-as-a-Service (IaaS) technology, including its ‘Star Lake’ customised cloud server solutions that are able to power the latest AMD chips, and self-developed ‘T-block’ data centre technology.

“While 2020 was a year of unprecedented challenges, solid results across all our businesses testify to our focus on user value, technology innovation and business sustainability,” said Tencent Chairman and CEO Ma Huateng.

“We extended our leading position in the consumer internet space with enriched content and innovations across our products, while making notable progress in international expansion, starting with games,” he added.

Tencent also said that it will continue to invest in cloud infrastructure and technology, and work with partners to upgrade its aaS solutions.

Tencent invests $279 million in AI chip startup

Tech giant Tencent has invested a staggering $279 million (1.8 billion yuan) into an artificial intelligence (AI) semiconductor chips manufacturing company in China.

Enflame Technology, headquartered in Shanghai, has received funding from Tencent and several other investors including China’s state-owned conglomerate group CITIC, and investment firms China International Capital Corporation (CICC) and Primavera.

Tencent’s investment will allow it to segue into the booming semiconductor chip industry, which is currently dominated by NVIDIA, AMD, and most recently, Intel after its acquisition of US chipmaker Xilinx.

This move by the Chinese tech company is also expected to contribute to China’s plan to become more self-reliant in the technology sector after numerous tech-related bans by the US, such as TikTok and Huawei’s 5G development.

Founded in 1998, Tencent is best known for messaging app WeChat and multiplayer video game League of Legends. The company reported $5.88 billion in profit in the third quarter of 2020, a 29% year-on-year increase.

This is Tencent’s fourth time injecting funds into Enflame Technology, which was founded in 2018.

Semiconductor chips produced by companies such as Enflame Technology are becoming more important to the global tech market, because these chips are capable of processing large amounts of data which are used to train AI models and power data centers.

AI technology is taking over

Technological developments, increase in demand for Big Data and analytics, and increased digitisation across all sectors are factors fuelling the growth of the global AI hardware market.

The onset of COVID-19 has fuelled utility & adoption of artificial intelligence (AI) hardware, due to its ability to screen, track and predict the present and future patients affected by coronavirus infection.  According to the NewVantage Partners, the number of companies that invest over $500 million annually in big data increased to 21.1% in 2019 from 12.7% in 2018, indicating the importance of AI and Big Data across organizations, hence propelling industry growth.

Meanwhile, Asia Pacific market is anticipated to experience robust growth over 2020-2027, owing to increasing investment in AI technology by different end-use industries, and rising demand for big data and analytics in the region.

Singapore to be regional hub for Tencent after US and India setbacks

Tencent, China’s largest social media and gaming company, has picked Singapore as its beachhead for Asia, joining rivals Alibaba and ByteDance in setting up a Southeast Asia hub.

The decision has come after setbacks in the USA and India where products and companies from China are being banned from doing business.

According to people familiar with the matter, management at Tencent had reportedly been discussing Singapore as a potential regional hub and shifting business operations like international game publishing outside of China after geopolitical tensions accelerated their plans.

Tencent said in a statement that it will open a new Singapore office, in addition to their current ones in Malaysia, Indonesia and Thailand to support their growing business in Southeast Asia and beyond.

The tech giant is recruiting for various positions, including tech and business development, cross-border commerce, cloud computing and e-sports.

Political tensions causing technical difficulties

Tencent’s decision to expand in Southeast Asia comes in the face of US President Donald Trump imposing bans on American companies dealing with Tencent’s super-app WeChat from September 20, much like the ban on TikTok in the country. 

Meanwhile, in India, Tencent’s hit games PUBG Mobile and Arena of Valor were banned in India, leading to PUBG Corporation cutting ties with Tencent in India.

But Tencent is not alone in this predicament. 

Rising border tensions has prompted the Indian government to ban 118 Chinese apps, including top social media platforms and applications like Helo, Alipay, and Baidu due to security concerns. Many of these apps are operated by the largest Chinese internet companies like Tencent, ByteDance and Ant Financial. 

Across the Pacific, the White House has led a campaign against Chinese technology giants from Huawei to ByteDance, alleging that these companies are collecting American user data for Beijing, a claim several firms have denied.

Why Singapore?

China’s tech behemoths are increasingly turning to Southeast Asia, with its 650 million increasingly smartphone-savvy population, in the face of growing hostility from the US and other major markets.

Singapore is particularly attractive as a regional base for tech companies across the world, with its advanced financial system, low tax, sophisticated digital infrastructure and highly educated workforce.

Amidst rising tensions between the economic powerhouses of the USA and China, Singapore has sought to remain neutral, with Prime Minister Lee Hsien Loong pledging last year to remain “good friends” with both countries.

For Tencent, this venture into Southeast Asia will be a slightly newer experience, as the dominant entertainment provider has largely run its operations out of Shenzhen, though it does store some user data in Singapore.

Tencent also announced a new digitalisation strategy to boost economic recovery in the post-pandemic era, which could be brought with it to Singapore.

“We will become a ‘digital assistant’ that facilitates a transformation and upgrade for all industries and walks of life. Together we can build an open, innovative and secure ecosystem,” said Pony Ma, the Chairman and CEO of Tencent.

Tencent will invest US$1.4 billion (RMB10 billion) to assist SMEs and provide them with 100 Software-as-a-Service solutions as well as 100 training courses by collaborating with 100 partners to tailor the solutions for each enterprise customer.

“Industries that embrace digitalisation will develop and evolve into mutually beneficial ecosystems,” said Dowson Tong, the Senior Executive Vice President of Tencent and President of the Cloud and Smart Industries Group.

As for Tencent’s competitors, ByteDance, the owner of TikTok, was said to be planning to invest billions of dollars and recruit hundreds in Singapore as part of its global expansion strategy. It has also applied for a digital banking license from the city-state’s central bank, alongside Alibaba-backed Ant Group and Tencent-backed Sea Ltd.

Chinese tech giant, Alibaba, has also made significant investments in Singapore by taking full control of local e-commerce platform Lazada for US$4 billion, buying half of Singapore’s AXA Tower for US$1.2 billion, and just this week, Bloomberg reported that the tech giant is looking to invest US$3 billion in Singapore’s ride-hailing giant, Grab.

With the city-state seeing an influx of foreign investments from tech companies in recent years, it appears that Singapore’s approach has served the nation’s interests well.

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Asia’s $3bn Cloud Gaming opportunity needs strong IT infrastructure and edge data centers to become a reality

Cloud gaming is a US$3 billion opportunity for Asia, but for the game streaming technology to take off, it needs strong and reliable IT infrastructure like edge data centers to become a reality.

This is what we discovered during our first GameTech digital event with experts from Tencent, OVHcloud and Nazara Technologies.

“Asia is a very interesting continent where you have established and evolved games, to very young, casual or first-time gamers. That makes it very exciting,” said Manish Agarwal, the CEO of Nazara Technologies.

Tech giants like Google, Amazon, Alibaba Cloud and Tencent are looking to take on established players in the gaming industry such as Microsoft, Sony, EA and NVIDIA as well as cloud gaming pioneers Vortex, LiquidSky, Parsec and Shadow.

“The beauty of a lot of these countries in Asia is they have no preconceived baggage of what gaming should be. The adoption of the new age technologies is going to be super fast, because what gaming offers is a pure, uninhibited, unhindered interactive entertainment,” added Mr. Agarwal.

However, for cloud gaming to be affordable by providers, it is important to reduce friction of price points, lag and latency, processing and optimising infrastructure.

“Asia is a very value conscious market. Cloud gaming is poised for the big boys who have very, very deep pockets because it entails building technology infrastructure, consumer acquisition retention and content acquisition,” said Mr. Agarwal.

The critical importance of reliable IT infrastructure and edge data centers for cloud gaming

To ensure a successful cloud gaming future, strong and reliable IT infrastructure is of critical importance to ensure low latency and lag, which is absolutely necessary for gamers who need a seamless experience.

As a result, user experience depends on the last mile speed, meaning that the end user needs to connect to its nearest location with high speed connections.

Davy Wang, the Chief Solutions Architect of Tencent Cloud, said: “Tencent has built a lot of data centers and edge locations all over the world and we are trying to build as much as possible for the bandwidth to make sure that the connections between data centers, the user and pop locations will be big enough and the performance will be high.”

Mr. Wang expected cloud gaming will consume more resources than traditional games because everything needs to be processed on the cloud, consuming CPU, memory and hard disks. Tencent optimised multi tenancy to make good use of their hardware resources and lower the cost of operation.

OVHcloud invests heavily in their network to enable seamless and affordable gaming. This is why their network capacity almost doubles every few years to respond to the constantly growing number of gamers in Asia.

James MacKenzie, the Technical Product Manager at OVHcloud, said: “Since I’ve been working here, it’s about almost five times as big as it was. Globally, today, we have about 30 data centers with 34 points of presence.”

OVHcloud also works with startups and partners like AMD to develop solutions that could empower the future of cloud gaming.

“Even though sometimes it’s not 100% there yet, there is technology that is emerging where we can get our hands on it, test it, and see if it’s going to work for these new use cases,” added Mr. MacKenzie.

Looking forward to the future, both Mr. Wang and Mr. MacKenzie agreed that advancements in edge data centers and 5G as well as virtual reality and augmented reality could have a significant impact on the cloud gaming industry.

5G in particular could fulfil the mission of cloud gaming by enabling gamers to play anywhere at any time since cloud gaming is similar to video streaming platforms like YouTube or Netflix for end user devices, so even the oldest of phones could have the potential to play high performance games.

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Tencent aims for tech domination with US$70bn ‘new infrastructure’ investment

Tencent, China’s tech giant, revealed it will invest US$70 billion in ‘new infrastructure’ over the next five years in the race for tech domination.

The world’s largest online gaming company plans to spend on cloud computing, big data centers and cybersecurity to compete with the likes of Alibaba Cloud and Amazon.

Tencent joins China’s ‘new infrastructure’ strategy to boost economy

Tencent’s announcement on Tuesday follows China’s ‘new infrastructure’ initiative to leverage on the country’s boom in demand for cloud services and upgrade digital infrastructures to enable growth.

The Senior Executive Vice President of Tencent, Dowson Tong, was quoted by Guangming Daily as saying: “Expediting the ‘new infrastructure’ strategy will help further cement virus containment success.”

China’s economy shrank by 6.8% in the first three months of 2020, ending almost 50 years of consistent growth.

Reuters reported Tencent’s investment will look to expand into business services, as consumer internet growth slows and companies shift number-crunching from their own computers to the cloud.

The WeChat creator’s shares grew by 2.5% after the investment announcement. This growth comes after Tencent saw a slower revenue increase of 22% in their FinTech and Business Services, including Tencent Cloud, in the first quarter of 2020 compared to 39% in Q4 2019.

Mr. Ma Huateng, the Chairman and CEO of Tencent, said: “So far, our businesses have proved resilient and cashflow-generative, enabling us to increase our investment to fulfill our mission of ‘Tech for Good’.”

Tencent’s online gaming revenue grew by 31% year-on-year to US$5.2 billion, and this may increase even more with Tencent’s move into cloud gaming.

Tencent takes on Alibaba Cloud

Tencent had 18% of China’s cloud market in the fourth quarter of 2019, grew by 111% globally and ranked as the third largest Infrastructure-as-a-service provider in Asia Pacific last year.

Tencent also became the first company with more than one million servers in China, the country with the second largest cloud market.

Alibaba Cloud commanded 46.4% of the Chinese market, making it not only the largest in China, but also the rest of Asia Pacific.

In a webcast, Daniel Zhang, Chairman and CEO of Alibaba Group, identified that the Software-as-a-Service market and wider ecosystem is more mature in the United States compared to countries like China where a developer ecosystem ‘is just starting to get going’.

The data intelligence backbone of Alibaba Group achieved a revenue growth of 58% year-over-year to US$1.7 billion in the first quarter of 2020.

Alibaba Cloud recently announced a US$30 million SME cloud adoption program along with US$28 billion worth of data center investments covering 21 regions, including Indonesia, Malaysia and Singapore to support digital transformation in a post-pandemic world.

Mr Zhang predicted the pandemic will further accelerate digital transformation of enterprises with industries like public sectors choosing to move to the cloud, despite concluding the fiscal year with a quarter impacted by the economic effects of the COVID-19 pandemic.

Tencent also expected to see accelerated cloud services and enterprise software adoption from offline industries and public sectors over the longer term.

Tencent’s US$70 billion investment will also focus on key sectors, including artificial intelligence, 5G networks, blockchain and Internet of Things operating systems.

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